nep-ent New Economics Papers
on Entrepreneurship
Issue of 2004‒12‒12
eleven papers chosen by
Marcus Dejardin
Facultés Universitaires Notre-Dame de la Paix

  1. Scale, scope and entrepreneurship By George C. Bitros
  2. The liberating power of entrepreneurship in ancient Athens By George C. Bitros; Anastassios D. Karayiannis
  3. Entrepreneurship over Time: Measures of Activity and Recent Changes in the US: 1993-2002 By Paul Reynolds
  5. The Impact of the Locus-of-Control Personality Trait on the Earnings of Entrepreneurs vis-à-vis Employees By C. Mirjam van Praag; Justen van der Sluis; Arjen van Witteloostuijn
  6. Learning of SMEs in networks: the role of absorptive capacity By Waalkens, J.; Jorna, R.; Postma, T.
  7. Towards a Dynamic Theory for the Spatial Knowledge Economy By Karlsson, Charlie; Johansson, Börje
  8. A knowledge-based approach to innovation: an application for project-based firms By Bosch-Sijtsema, P.; Postma, T.J.B.M.
  9. Does Knowledge Diffusion between University and Industry Increase Innovativeness? By Lööf, Hans; Broström, Anders
  10. Competition and Growth in Neo-Schumpeterian Models By Piercarlo Zanchettin; Vincenzo Denicolò
  11. Excess Entry, Ambiguity Seeking, and Competence: An Experimental Investigation By Daniela Grieco; Robin Hogarth

  1. By: George C. Bitros (Athens University of Economics & Business)
    Abstract: To exploit the economies of scale and scope in multi-product technologies, enterprises in advanced capitalist countries grew in the last 150 years in three directions. By substituting in the place of traditional entrepreneurs professional managers, they developed organisational capabili-ties to co-ordinate effectively activities that were widely dispersed geographically and function-ally. They promoted rapid innovation by resorting to systematic Research and Development ef- forts. And, finally, they enhanced control over their markets by introducing innovations whose application required large-scale investment. In the course of these transformations the material standards in the respective countries rose to unprecedented levels. But simultaneously they led to losses in market co-ordination be-cause these transformations increased market imperfections. As a result the economies of scale and scope appear to be negatively related to the ratio of co-ordination to innovation in the econ-omy. Hence, to the extent that policy makers strive to achieve the priorities of citizens, they are advised to allow for the implications of this relationship to the best of available information.
    Keywords: Entrepreneurship, co-ordination, innovation, economies of scale and scope.
    JEL: D1 D2 D3 D4
    Date: 2004–11–22
  2. By: George C. Bitros (Athens University of Economics & Business); Anastassios D. Karayiannis (University of Piraeus)
    Abstract: Our objectives in this paper are threefold. First, we identify the nature of entrepreneurial climate in ancient Athens. Drawing on the analyses of Athenian writers we argue that, although philosophers, politicians, and generals enjoyed greater civil and social status relative to those pursuing wealth-creating activities, ancient Athenians were not negative to efforts at making “moderate” profits that were used also for promoting the well being of the city. Second, we inquire if and to what extent the city-state of Athens (mainly during the 5th century BC) had an active policy for encouraging metics (i.e. resident aliens) and slaves to assimilate into the Athenian society through success in business. And, finally, we characterise the degree to which metics and slaves were able to take advantage of the prevailing institutional set- up in order to achieve social advancement and individual liberty. Our main conclusion is that in ancient Athens there operated a system of economic and social incentives that had been deliberately designed to promote entrepreneurial activities.
    Keywords: Entrepreneurship, social advancement, individual autonomy, individual liberty.
    JEL: B
    Date: 2004–11–22
  3. By: Paul Reynolds
    Abstract: Data from three different research programs, all measuring the prevalence rate of new firm creation in the US adult population, suggest that from 1993 to 2002 the level of entrepreneurship may have increased up to three fold, from 4 to over 13 percent of those 18-74 years of age - a shift from one in twenty adults to one in six adults. In 1993 entrepreneurial activity was more prevalent than marriages or parenting, by 2001 it was twice as common as marriages and parenting combined. Current evidence indicates that the high level of participation in start-ups in 1999-2002 was not reflected in the presence of new firms, suggesting that a smaller proportion of start-ups made the transition to an operating business. This may reflect a "rush to entrepreneur" among those with insufficient preparation or resources to successfully launch a new firm.
    Date: 2003–04
  4. By: João Pedro W. de Azevedo
    Abstract: Several economic models have described the theoretical causes and onsequences of 'credit rationing' and 'under-investment'; one string of this literature shows the long-run effects of initial wealth distribution and entrepreneurial ability on the process of occupational choice and performance, and its consequences on inequality. Surprisingly, there is very little micro-level evidence on the existence and effects of 'credit rationing' in the context of developing countries. This is the contribution of the current paper. Using a survey of 4,553 entrepreneurs in 51 slums in Rio de Janeiro, this paper uses mean and quantile regression estimates to shows the effects of the type of initial capital, credit constraints, and human capital factors on entrepreneurs' performance. The main findings of the the paper are that entrepreneurs that were able to self-finance their business start-up presented earnings 16% greater than entrepreneurs that had to borrow their initial capital. In addition, entrepreneurs that explicitly claimed to be credit constrained performed substantially worse than their observationally identical counterparts, even if they were credit worthy. Both, initial source of funding and liquidity constraint presented greater effects on the highest quantiles. In terms of human capital, the current study shows positive and statistically significant returns for both years of schooling and experience, with higher returns on the lowest quantiles, indicating the potential role of these factors on inequality reduction.
    JEL: J24 J62 J44
    Date: 2004
  5. By: C. Mirjam van Praag (Faculty of Economics and Econometrics, Universiteit van Amsterdam); Justen van der Sluis (Faculty of Economics and Econometrics, Universiteit van Amsterdam); Arjen van Witteloostuijn (University Groningen, and University of Durham)
    Abstract: In the management literature, the locus-of-control concept has been applied extensively over the past three decades. This research note reports the results of a panel data study among a representative sample of 6,111 US young citizens who have been interviewed on a regular basis over a period of about two decades. In addition to this, various relevant personality traits and parental background characteristics have been administered before the first wave and before these young people started working. By analyzing this panel dataset, we offer three contributions to the locus-of-control literature. First, we test for the robustness of the locus-of-control effect on individual performance (in terms of hourly earnings) in the context of this impressive panel data context. Second, we explore whether or not the performance impact of the locus-of-control personality trait is different for employees vis-à-vis entrepreneurs. Third, we check whether the performance effect of an individual’s locus-of-control score interacts with her or his level of education. Our findings reveal that internality affects earnings positively, that this effect is stronger for entrepreneurs, and that education positively interacts with internality.
    Keywords: Entrepreneur; self-employment; earnings; return to education; locus-of-control; personality
    JEL: M13 J24 J31 N3 C33
    Date: 2004–11–29
  6. By: Waalkens, J.; Jorna, R.; Postma, T. (Groningen University)
    Abstract: This paper deals with innovation and the role of absorptive capacity in SMEs. Building on the seminal paper of Cohen and Levinthal (1990) in which R&D-expenditure is taken as the main indicator for absorptive capacity, this paper discusses four alternative indicators, i.e. Internal Knowledge Base, (Formal) Cooperation, External Knowledge Base and Internal Cooperation. A conceptual model and hypotheses are developed in which these indicators are related to each other. Their possible explanatory power towards innovation output is specified.
    Date: 2004
  7. By: Karlsson, Charlie (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Johansson, Börje (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: In recent decades the world has witnessed the emergence of a global knowledge economy. For example, the evolution in recent decades of the developed economies has been accompanied by a regional shift in economic activity away from traditional industrial regions to new agglomerations of high technology, creating an explosion of entrepreneurial activity and new firm formation. For the OECD countries in particular, we can observe a transfer from an industrial economy to a knowledge economy. The supporting evidences are overwhelming and indicate that the trend is global. The emerging knowledge economy have attracted much interest among economist and generated many important contributions during the last two decades. However, the literature does not provide a comprehensive picture and we are indeed lacking a “general theory” of the knowledge economy. Various aspects of the emerging knowledge economy has been thoroughly analysed both theoretically and empirically but the overall synthesis is not yet present. Something to ask for would be a coherent theoretical framework that can explain how growth-induced investments in knowledge production stimulate localised, entrepreneur-driven innovations, which generate structural change and economic growth in an integrated system of functional regions. An interesting observation is that many of the necessary building blocks already seem to exist but that they are still waiting for someone to integrate them. The current state-of-the-art also includes inconsistent components. The purpose of this paper is to contribute to such an integration of the existing pieces of knowledge.
    Keywords: Knowledge; Economic Growth; New Economic Geography; Innovation Systems; Entrepreneurship
    JEL: M13 O31 O40 R11
    Date: 2004–12–02
  8. By: Bosch-Sijtsema, P.; Postma, T.J.B.M. (Groningen University)
    Abstract: The knowledge-based view (KBV) of firms has received increasingly attention. A relatively unexplored area is knowledge transfer in project-based industries (PBIs). Traditional project management literature relies upon combining expertise from several internal and external parties in order to deliver their own capabilities in a one-off process. Due to the unique character of projects, knowledge of projects is difficult to transfer. Furthermore, the short-term perspective and fluctuating partners make it harder to develop new knowledge in cooperation with parties in the network. This paper aims at developing a conceptual framework for investigating innovation in PBI from a network perspective. We discuss knowledge properties of the project-based organization (PBO) and its network, governance relationships that affect the knowledge transfer and the impact of the industry context on knowledge transfer and innovation performance. We present illustrations from the construction industry and end with a set of propositions.
    Date: 2004
  9. By: Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Broström, Anders (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Empirically this paper seeks to assess the effect of firms’ R&D collaboration with universities on innovation. A cross-sectional propensity score matching estimator is applied to the Swedish Community Innovation Survey data over 1998-2000, which provides information about cooperation on innovation reported by 790 R&D or innovation investing firms with at least 10 employees. Approximately 25 percent of these firms collaborated with universities on innovation projects. The results shows that university/industry collaboration has a significant and positive influence on three measures of innovative activity. First, the average R&D firm that cooperate on innovation with universities spend more money on R&D compared to an almost identical R&D firm (constructed by the two nearest neighbours) witch has no collaboration with academic researchers. Second, collaborating firms have a larger propensity to apply for patents than other R&D firms. Finally, income from new product sales is considerable greater for a firm that have joint research projects with universities than for a non-collaborating twin firm.
    Keywords: R&D investment; innovation; patents; industry-university link; matching methods.
    JEL: C24 L10 O30 O31 O38 O40
    Date: 2004–12–02
  10. By: Piercarlo Zanchettin; Vincenzo Denicolò
    Abstract: We study the effect of product market competition on the incentives to innovate and the economy's rate of growth in an endogenous growth model. We extend previous works in industrial organization by assuming that innovation is sequential and cumulative, and early endogenous growth models by accounting for the possibility that in each period many asymmetric firms (i.e., an endogenously determined number of successive innovators) are simultaneously active. We identify the price effect, the front loading of profits, and the productive efficiency effect associated with an increase in competitive pressure. The price effect reduces the incentives to innovate, but both the front loading of profits and the productive efficiency effect raise the incentives to innovate. We demonstrate circumstances in which the productive efficiency effect dominates the price effect. In these circumstances, the front loading of profits and the fact that the productive efficiency effect dominates the price effect compound to make the equilibrium rate of growth increase with the intensity of competition.
    Date: 2004–10
  11. By: Daniela Grieco; Robin Hogarth
    Abstract: Excess entry refers to the high failure rate of new entrepreneurial ventures. Economic explanations suggest 'hit and run' entrants and risk-seeking behavior. A psychological explanation is that people (entrepreneurs) are overconfident in their abilities (Camerer & Lovallo, 1999). Characterizing entry decisions as ambiguous gambles, we alternatively suggest–following Heath and Tversky (1991)–that people seek ambiguity when the source of uncertainty is related to their competence. Overconfidence, as such, plays no role. This hypothesis is confirmed in an experimental study that also documents the phenomenon of reference group neglect. Finally, we emphasize the utility that people gain from engaging in activities that contribute to a sense of competence. This is an important force in economic activity that deserves more explicit attention.
    Keywords: Competence, excess entry, entrepreneurship, overconfidence
    JEL: C91 L10
    Date: 2004–10

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